What is an "item of daily use" for income tax purposes?

Income tax relevance of private assets under Sect. 23 of the Income Tax Act

The German income tax relevance of assets differs fundamentally between private assets and business assets for tax purposes. In the latest ruling by the Federal Tax Court (Judgement of the Federal Tax Court dated December 11, 2025, file number IV R 17/23, margin no. 40), the court said: "The determination of income from businesses follows ... different rules than the determination of income from private assets. While the sale of private assets is generally tax-free (exceptions: Sect. 17, 20(2), 23 of the Income Tax Act), hidden reserves in business assets are permanently subject to tax." Sect. 17 and 20(2) of the Income Tax Act essentially impose income tax on sales of shares in corporations held as private assets for tax purposes. Sect. 23 of the Income Tax Act focuses on "real estate" and related rights (Sect. 23(1) sent. 1 no. 1 of the Income Tax Act).

No. 2, on the other hand, deals with "other economic goods." For these, Sect. 23(1) sent. 1 no. 2 sent. 1 of the Income Tax Act stipulates a period between acquisition and sale of no more than one year for taxability. According to sent. 4, this period is extended to ten years if income is generated from the use of the asset in at least one calendar year. However, sent. 2 excludes "sales of items of daily use."

The legislature had introduced the latter restriction on taxability with the Annual Tax Act 2010 precisely in response to a ruling by the Federal Tax Court. The latter had also included items such as a used car in Sect. 23 of the Income Tax Act (Judgement of the Federal Tax Court dated April 22, 2008, file number IX R 29/06, Federal Tax Gazette II 2009, p. 296). The interpretation of what constitutes "items of daily use" is therefore also left to the courts. In this regard, the Federal Tax Court has already ruled that "tickets for the UEFA Champions League final" are not to be regarded as such items. For this to be the case, the items would have to "objectively be subject to depreciation and/or have no potential for appreciation" (Judgement of the Federal Tax Court dated October 29, 2019, file number IX R 10/18, Federal Tax Gazette II 2020, p. 258).

A "luxury motorhome" as an "item of daily use"? 

The circular by the Federal Tax Administration on Sect. 23 of the Income Tax Act dated October 5, 2000 (Federal Tax Gazette I 2000, p. 1383) does not contain a statement by the tax authorities on the question of "items of daily use" – it was issued long before the Annual Tax Act 2010. In the case with the file number IX R 4/25, the Federal Fiscal Court now had to clarify whether a high-priced, “luxury” motorhome also falls outside the scope of taxation as an "item of daily use" within the meaning of Sect. 23(1) sent. 1 no. 2 sent. 2 of the Income Tax Act. 

By renting such a motorhome to his wife's tax advisory business, the plaintiff had temporarily generated income pursuant to Sect. 22 no. 3 of the Income Tax Act ("income from the rental of movable property"). The Lower Fiscal Court (Judgement of the Tax Court of Saxony dated December 20, 2024, file number 5 K 960/24) held that it was an "item of daily use" despite its acquisition costs of approx. EUR 380,000. The Lower Tax Court denied the "fundamental significance" of the legal issue at hand in the context of Sect. 115(2) of the Tax Court Code (“Finanzgerichtsordnung”).

The Federal Tax Court, on the other hand, had allowed the appeal on the basis of a complaint of non-admission (“Nichtzulassungsbeschwerde”). Nevertheless, it came to the conclusion that the tax office's appeal was unfounded (on this sequence of events, see, for example, Judgement of the Federal Tax Court dated October 20, 2016, file number VI R 27/15, margin note 10). An "item of daily use" must be an item of utility purchased primarily for usage by the taxpayer which, when viewed objectively, is subject to depreciation and/or has no potential for appreciation in value, whereby daily use is not necessary. The value of an asset is not in itself a suitable criterion for assessing the requirements of Sect. 23(1) sent. 1 no. 2 sent. 2 of the Income Tax Act (on the application of Sect. 4(5) sent. 1 no. 7 of the Income Tax Act to related expenses, however, see Judgement of the Federal Tax Court dated March 25, 2015, file number X R 14/12). For this reason, even an asset that would be considered expensive by the average observer ("luxury good") could be an item of daily use (margin no. 23). Even occasional use for the purpose of generating income does not preclude this classification. The mere fact that this extends the period of taxability from one to ten years (Sect. 23(1) sent. 1 no. 2 sent. 4 of the Income Tax Act) does not preclude this conclusion, either. 

The narrow income type of Sect. 23 of the Income Tax Act

The Federal Fiscal Court describes the legislative intention behind Sect. 23(1) sent. 1 no. 2 sent. 2 of the Income Tax Act as follows (Judgement of the Federal Tax Court dated October 29, 2019, file number IX R 10/18, Federal Tax Gazette II 2020, p. 258, margin no. 30): "The term 'items of daily use' is not defined by law. From the materials relating to the Annual Tax Act 2010 of December 8, 2010 (BGBl I 2010, 1768 ff.), it follows that the provision aims to prevent losses on items of daily use that are primarily purchased for use and are subject to depreciation, such as used vehicles, from having any effect under tax law."

However, with regard to losses under Sect. 23 of the Income Tax Act, the legislature has already made provisions in the narrow income type of Sect. 23(3) sent. 7 and 8 of the Income Tax Act: According to this, a (horizontal) offset against the taxpayer's profits from private sales transactions in the same calendar year is possible, but the deduction under Sect. 10d of the Income Tax Act is not. However, pursuant to Sect. 10d of the Income Tax Act, a deduction is possible from profits generated in the immediately preceding assessment period or in the following assessment periods from private sales transactions pursuant to Sect. 23(1) of the Income Tax Act. The narrow schedule of Sect. 23 of the Income Tax Act includes some "profitable" investments – in particular, the Federal Fiscal Court has also classified virtual currencies in the form of currency tokens as "other economic goods" within the meaning of Sect. 23(1) sent. 1 no. 2 of the Income Tax Act (Judgement of the Federal Tax Court dated February 14, 2023, file number IX R 3/22, Federal Tax Gazette II 2023, p. 571).